February 04, 2015

Medicare compliance continues to create "confusion, misinformation and disagreement" among defendants, their insurers and advisors according to speakers at the 2015 Winter Regional Conference hosted by the National Alliance of Medicare Set-Aside Professionals (NAMSAP) January 29 in Orlando.

NAMSAP is "the only non-profit association exclusively addressing the issues and challenges of the Medicare Secondary Payer Statute and its impact on workers’ compensation and liability settlements".

NAMSAP's membership is the most professionally diverse of any U.S. settlement planning association and includes a mix of attorneys, Medicare Secondary Payer (MSP) consultants, CPAs, claims adjustors, structured settlement consultants, guardians, nurses, pharmacists, rehabilitation professionals, and life care planners.

The claims environment has changed dramatically and become much more complex, according to multiple NAMSAP speakers who focused their presentations on issues that arise when Medicare is involved in a case.

Medicare issues are complicated for defendants by adjustor turnover, the need for Medicare education and the comprehensive liability defendants face if Medicare is not protected. Medicare compliance, therefore, is not just about preparing a good Medicare set-aside (MSA). It is about complying with the Medicare Secondary Payer (MSP) statute.

The MSP statute, as amended by the SMART Act in 2013, has three compliance components (past reimbursement; present reporting; and future protecting) which one of the NAMSAP panels succinctly summarized. The greatest confusion for plaintiffs and defendants relates to protecting Medicare's interest in the future. One speaker compared the current situation to the "wild west" and several speakers emphasized "it is all about the data".

Focusing most of its compact program on MSP compliance, NAMSAP's Educational Committee successfully presented multiple complex topics and developments effectively utilizing a case study methodology to advise attendees on issues they can expect to confront in their own case files.

WCMSAs have become an increasingly important submarket for structured settlements. S2KM has previously estimated that as much as eight (8%) percent of recent structured settlement premium and 24 percent of recent structured settlement annuities are attributable to WCMSAs.

In the WCMSA context, structured settlements have one primary advantage (lower cost), which (from a defense perspective) outweighs their one primary disadvantage (administrative complexity), compared with cash. The cost advantage results from one CMS policy memorandum (dated: October 15, 2004) which sets forth the CMS "set-off" approach for calculating present value.

NAMSAP anticipates two alternative MSP legislative proposals will be re-introduced in the U.S. House of Representatives (H.R. 1982) and Senate (S. 2731) in 2015

Liability MSAs - CMS-6047-ANPRM

Unlike WCMSAs, almost no regulatory authority exists for MSAs in third party liability settlements. In 2012, pursuant to the Administrative Procedures Act, CMS sent to the Office of Management and Budget (OMB) and published in the Federal Register seeking public comment an Advanced Notice of Proposed Rule Making (ANPRM) for liability MSAs.

Virtually all of the comments, according to Shaw, opposed the ANPRM in whole of in part. The primary objections concerned CMS' concept of "equitable apportionment" and the CMS failure to recognize differences between liability and workers compensation cases.

CMS followed up its ANPRM by sending a Notice of Proposed Rule Making (NPRM) to OMB on August 1, 2013, then withdrew the NPRM without explanation on August 8, 2014. Shaw stated that OMB (which reviews NPRM for cost and benefits, duplications, economic impact, effect on stakeholders) rejected the CMS NPRM and no one knows why except OMB and OMB is prohibited from providing explanations.

Shaw cautioned against groups (such as the AAJ) claiming a regulatory victory. He expects CMS to resubmit another NPRM for liability MSAs in the near future. Multiple NAMSAP speakers pointed out the obvious - since the enactment of MMSEA in 2007, CMS has been collecting data for all claims involving Medicare beneficiaries. This Medicare-related claims data is creating a potential tax-free source of revenue for the U.S. government - billions of Medicare dollars not yet collected to fund Medicare.

As for current liability cases and liability MSAs, Shaw advised that "nothing has changed so we should stay the course and do whatever we thought best before this ANPRN/NPRM."

ICD-10

Adding to claim management and settlement planning complexity in 2015, the United States compliance date for the 10th revision of the International Statistical Classification of Diseases and Related Health Problems (ICD-10) is October 15, 2015.

Although most of the NAMSAP audience appeared ICD-10 conversant, Marci Moorehead provided an informative overview of this World Health Organization (WHO) medical classification coding system which many other countries have already implemented. Moorehead predicted the migration to ICD-10 will have a significant impact on business intelligence tools which means life care plans, MSAs and settlement plans likely will be affected.

NAMSAP's 2015 Annual Meeting will take place September 29-October 2 at the Royal Sonesta Hotel in New Orleans.

July 01, 2014

Is the Affordable Care Act (ACA) good or bad for structured settlements? What impact will it have on settlement planning in personal injury cases?

Four years following the ACA's enactment, and two years after the U.S. Supreme Court upheld its primary provisions as constitutional, including the individual mandate and elimination of pre-existing condition restrictions which became effective nationally on January 1, 2014, those questions not only lack definitive unanswers - they have not yet been comprehensively addressed in any public forum.

One primary related issue is what impact the ACA will have upon future medical expenses in personal injury cases. The answer depends, however, not only on the terms and conditions of the ACA, but also on how the ACA interacts with other related laws and legal developments such as Medicaid (including the Bipartisan Budget Act of 2013), Medicare (including WCMSAs , liability MSAs and MMSEA) as well as state specific collateral source and subrogation rules.

To provide a point of reference for future S2KM reporting about the legal interplay involving the ACA, personal injury cases and structured settlements, S2KM is publishing a series of blog posts looking generally at the "ACA and Future Medical Expenses":

Part 1 reviews an article written by Seth Cardeli, titled "Thwart the Assault on Future Medical Expenses", which appeared in the May 2014 issue of the American Association for Justice (AAJ) Trial Magazine.

Part 2 summarizes ACA-related analysis by speakers at professional conferences S2KM has previously attended and includes excerpts from prior S2KM reviews of those conferences.

Part 3 (this post) summarizes similar ACA analysis from articles and papers previously reviewed by S2KM and also features excerpts from those reviews.

Authors of Articles and Papers Addressing ACA Issues

NAELA Journal

NAELA devoted the entire Spring 2011 edition of its "NAELA Journal" to health care reform generally and the ACA more specifically. Available to NAELA members only, this NAELA analysis featured a detailed introduction by NAELA Journal's then Editor-in-Chief William J. Brisk plus eight articles and a supplement of online resources.

Brisk's introduction addressed why health care reform is "too significant to ignore" and highlighted its most important features. His analysis identified what the ACA actually does and does not accomplish and emphasized the important roles Medicare, Medicaid, private health insurance companies and health maintenance organizations will play in implementing health care reform.

In addition to the Spring 2011 edition of the NAELA Journal, NAELA awarded its 2014 John Regan Writing Award, honoring the authors of the best article published in the "NAELA Journal" during the past year, to Alfred Chiplin, Jr. and Bethany Lilly, for their 2013 article titled "Medicare’s Future: Letting the Affordable Care Act Work, While Learning From the Past" analyzing various ACA cost-saving components on Medicare.

Chiplin and Lilly begin their article with an extensive review of the historical debate concerning public health insurance in the United States including a summary of key components of the current Medicare system and current concerns about Medicare solvency.

This historical debate not only defines the current structure of the Medicare program but also, according to Chiplin and Lilly, "the on-going debate ... about the necessary elements of a comprehensive program, including health care financing and accessing the quality of necessary services."

Chiplin and Lilly provide statistical evidence to highlight the negative impact of rising health care costs on Medicare and Medicare beneficiaries as well as the United States economy. Following their historical and statistical summaries, Chiplin and Lilly address the central issue in their article: "how will the ACA reduce health care costs?"

The ACA's cost-containment programs, according to Chiplin and Lilly, are based upon the theory that costs can be reduced by demanding a higher quality of care and greater efficiency from providers and allowing providers to share in the savings. ACA programs the authors highlight include:

Patient-Centered Medical Home

Medicare Shared Savings Program

The Independent Payment Advisory Board

Quality Review Mechanisms.

Chiplin and Lilly view ACA as "a vast experiment in paying for high-quality health care while preserving the Medicare program and expanding access to health care for other population segments." Implementation will be a tough, but doable challenge so long as we "let the tools of the ACA work".

Among the implementation challenges: the "fiscal cliff", insurance exchanges, and integrating services for "dual-eligibles". Overtime, the authors believe the ACA's spending and cost-containment provisions should at least slow the health care spending curve.

Seth Cardeli

The impact of the ACA on future medical expenses, perhaps the most important ACA-related issue for personal injury stakeholders, including settlement planners and structured settlement professionals, was addressed most recently by plaintiff attorney Seth Cardeli in an article featured in the May 2014 issue of the AAJ's Trial Magazine, and summarized by S2KM, titled "Thwart the Assault on Future Medical Expenses".

In his article, Cardeli labels as "speculative and misleading" current defense efforts to convince courts the ACA changed how courts should calculate future medical expenses thereby transforming the ACA into "the latest tort 'reform' vehicle." Their efforts should fail, Cardeli maintains, because they wrongly attempt to circumvent states' collateralsource and subrogation rules.

Cardeli's article cites cases from several state venues where courts have rejected defendants' attempts to limit plaintiff evidence of future medical expenses or to present their own evidence of ACA-related health care coverage. He urges plaintiff attorneys to aggressively oppose all related motions in limine by arguing:

The effect of the ACA on a plaintiff's recoverable future medical expenses is speculative.

Evidence of collateral sources is prejudicial to personal injury plaintiffs.

Tortfeasors should bear the risk that any future medical expenses will not be covered by medical insurance.

Joshua Congdon-Hohman and Victor Matheson

A 2012 research paper titled "Potential Effects of the Affordable Care Act on the Award of Life Care Expenses" and written by economists Joshua Congdon-Hohman and Victor Matheson provides a notable counter argument to Seth Cardeli's Trial Magazine article. Contrary to Caredi, these economistsmaintain: "the ACA may well have indirectly resulted in a great deal of tort reform" and, as a result, "awards in personal injury cases could be dramatically impacted".

Their argument:

When the ACA is fully implemented in 2014, all individuals will be required to purchase health insurance or pay a penalty.

The ACA provides insurance premium subsidies for low income individuals who do not receive health insurance through the government or from a family member’s employer.

The ACA prevents price discrimination based on health status and bans annual and lifetime expenditure limits.

Most individuals will pay the same cost for health insurance before and after an accident.

The legal maximum out-of-pocket expenses allowable under the ACA is $5,950 per year.

The goal of tort law is to make the plaintiff "whole".

Funding of health care through private insurance is a valid methodology for accomplishing this goal now that the ACA makes those markets available to injury victims.

Therefore, the ACA:

Should simplify and reduce calculations of future medical damages;

By limiting those costs to "[health insurance] premiums and out-of-pocket limits less any pre-injury expected medical costs and penalties if uninsured."

Similar to Cardeli, and significantly, Congdon-Hohman and Mathesonacknowledge a collateral source issue is "at play" and "remains of significant importance". Unlike Cardeli, however, they argue"there is reason to believe the ACA changes the underlying reason of excluding collateral source compensation from inclusion in tort cases."

More specifically, Congdon-Hohman and Matheson maintain: "removing existing health insurance coverage from exclusion under the collateral source rule would not significantly affect health insurance coverage rates reducing the economic rationale for having a collateral source rule in place for health insurance."

As a related result of the ACA, Congdon-Hohman and Matheson believe life care planners will play an increasingly important role in personal injury damage analysis.

Prior to the ACA, life care planners were tasked with identifying medical and living expenses not otherwise required "but for" the accident.

Under the ACA, the authors maintain life care planners must also identify which health care and living expenses will, and will not, be covered by the ACA's minimum insurance requirements. And, despite certain minimum federal standards, these requirements may also differ by state.

Rebecca Levenson and Ann Levin

During 2013, S2KM reviewed two law review articles which address whether and how the ACA will impact the collateral source rule (CSR):

Rebecca Levenson(Levenson), "Allocating the Costs of Harm to Whom They are Due: Modifying the Collateral Source Rule after Health Care Reform" (Levenson article), University of Pennsylvania Law Review, Volume 160.

Although every state and federal court recognizes the CSR in some form, many states have limited its scope or abolished it completely as a result of tort reform. Plaintiffs in different states and/or different courts therefore can receive widely different damage awards for the same injury because different courts measure medical costs differently.

Levenson and Levin each summarize traditional arguments favoring and opposing the common law CSR. However, neither Levin nor Levenson:

Directly address whether and/or how the CSR will affect calculations of future medical damages, as opposed to past medical damages.

Discuss how the ACA's restrictions against pre-existing conditions impact calculations of medical damages.

CSR proponents emphasize the deterrence theory of tort law which seeks to punish tortfeasors and deter them from injuring future plaintiffs:

Defendants should not be unjustly enriched if a plaintiff purchases medical insurance.

The CSR incentivizes plaintiffs to purchase medical insurance.

Collateral sources never fully reimburse plaintiffs.

Subrogation rights reduce and/or prevent double recoveries.

The CSR promotes independence of jury determinations.

CSR opponents argue the purpose of tort law is compensation for harm not deterrence. They criticize the CSR for:

Allowing some plaintiffs to recover twice.

Generating different damage awards for the same injuries in different cases.

Adding an unjustified element of punitive damages.

Inflating awards.

Encouraging claimants to go to trial.

Both Levenson and Levin agree the ACA's individual mandate weakens the traditional common law CSR rationale and that medical damages should now be calculated differently. However they do so for different reasons and propose different solutions.

Levin - Levin's primary argument for changing the traditional common law CSR is that it calculates medical damages based on medical provider bills instead of the lower negotiated reimbursement rate paid by most health insurers. To achieve fairness and accuracy post-ACA, Levin maintains courts should calculate medical damages using: 1) the negotiated reimbursement rate; and 2) a portion of the premium payments the plaintiff has paid for medical insurance.

Levenson - The purpose of changing the CSR after the ACA, according to Levenson, should be to align the CSR's outcome with the underlying goal of the individual mandate. Whether and what changes will occur, however, will vary from jurisdiction to jurisdiction depending upon a number of factors which Levenson identifies including the current status of the CSR in a particular state. Levenson insists any changes in the CSR must account for the different groups affected: insured plaintiffs, willfully uninsured plaintiffs and exempt plaintiffs.

Conclusion

For personal injury and settlement planning professionals who are attempting to understand how the ACA impacts personal injury damage analysis, future medical expenses, negotiation strategy, work product, and funding options, this S2KM blog series hopefully captures some of the complexity of the related laws, issues and perspectives and encourages continuing and more comprehensive analysis.

The impact of the ACA on structured settlements, and settlement planning more generally, depends not only upon the terms and conditions of the ACA itself, but also upon the new and evolving legal construct for future medical expenses in personal injury cases created by the interaction of the ACA with these related laws and legal developments.

April 15, 2014

Continuing a series of workers compensation (WC) Medicare set-aside (MSA) regulatory compliance initiatives, the Centers for Medicare and Medicaid Services (CMS) has published a WCMSA Self-Administration (SA) Toolkit.

CMS' stated purposes for this Toolkit are to help WCMSA self-administrators:

Manage their WCMSA accounts appropriately.

Satisfy Medicare’s interests related to future medical care.

Ensure Medicare will pay future Medicare-covered costs related to their WC injuries when the WCMSA is depleted.

MSA Background

MSAs are administrative and funding mechanisms utilized in certain categories of settlements to protect Medicare's interests as "secondary payer" under the Medicare Secondary Payer (MSP) statute. Enacted in 1980, the MSP Act requires certain insurers, including liability, automobile, no-fault and workers compensation insurers, to make payment first for services to Medicare beneficiaries regarding claimed injuries, with Medicare responsible only as a “secondary payer.”

CMS, the agency responsible for administering Medicare policies, failed to take practical steps to enforce the MSP rules until 2001 when it issued the first of several policy memoranda addressing WCMSAs. These policy memoranda created a format, checklists and procedures for seeking approval for WCMSAs to "protect Medicare's interests" when workers compensation cases are settled.

Several of these WCMSA policy memoranda address, directly or indirectly, structured settlement issues. One of these policy memoranda (dated October 15, 2004) addresses WCMSA present value calculations and provides an important pricing advantage for annuity funding compared with lump sum funding.

During 2013, CMS published both an 88 page WCMSA Reference Guide (WCRG) and a 13 page supplement (WCRG Version 2.0). The WCRG's intended purpose is to help WCMSA professionals, beneficiaries and other stakeholders "understand CMS' [WCMSA] amount approval process and to serve as a reference for those electing to submit such proposals to CMS for approval."

Significantly for structured settlements, WCRG Appendix 4 defines "present-day value" as "the cost to fund a WCMSA annuity" and further states: "[t]he WCRG follows all CMS policy memorandums currently in effect."

Although CMS and its field offices have also issued informal guidance about the use of MSAs in liability cases, nothing comparable exists to the CMS WCMSA memoranda, WCRG or WCMSA SA Toolkit. As a result, there currently is no consensus among tort practitioners as to whether and when MSAs are required in liability cases. Anticipating publication of MSA rules for liability cases, however, CMS has published HHS/CMS RIN: 0938-AR43.

Structured Settlements - Comparing the WCMSA SA Toolkit and the WCRG

Although both the MSAWC SA Toolkit (Toolkit) and the WCRG both address structured settlements in multiple sections, the administration (post-settlement) focus (including structured settlements) of the Toolkit is narrower than the WCRG and its treatment of structured settlement issues is generally less comprehensive.

Section 13: Letters and Examples - which includes three sample structured account attestation and expenditure letters which do not appear in the WCRG:

Annual attestation.

Temporary exhaustion.

Permanent exhaustion.

Section 14: Glossary - The Glossaries of the both Toolkit and the WCRG include definitions for "structured settlement". Although consistent, the two definitions are worded slightly differently. Neither definition mentions annuities or references the tax definition for "structured settlement" in IRC 5891(c)(1).

The Toolkit does not address structured settlement issues which appear in the following WCRG sections:

January 23, 2014

The recent National Alliance of Medicare Set-Aside Professionals (NAMSAP) Regional Conference highlighted the strategic importance of workers' compensation Medicare set-aside arrangements (WCMSAs), and their growth potential for structured settlements - as well as the need for more comprehensive and public MSA market metrics.

One logical starting point for determining MSA market metrics [as well as Medicare and Medicare Secondary Payer (MSP) metrics] is the CMS Financial Report for Fiscal Year 2013 which covers the October 1, 2012 to September 30, 2013 time period. Selected highlights:

Medicare

"Medicare processes over one billion fee-for-service (FFS) claims a year, and accounts for approximately 15 percent of the Federal Budget."

"Medicare enrollment has increased from 19 million beneficiaries in 1966 to over 52 million beneficiaries."

"CMS and its contractors process over one billion Medicare claims annually."

MSP and WCMSAs

"CMS’ efforts in the MSP area saved the Medicare Trust Funds approximately $8.93 billion in FY 2013."

"Under MMSEA section 111 requirements, group health plans began limited reporting of data in January 2009 and were fully phased in as of January 2011. Workers' compensation, liability insurance and no-fault insurance began limited reporting of data in June 2010, and reporting thresholds will gradually be implemented through January 1, 2015."

"As of October 2013, there were over 1,400 insurers reporting data to CMS under section 111."

"The implementation of section 111 is the single largest contributor to growth of Medicare savings of $6.5 billion in FY 2007, to approximately $7 billion per year in FY 2011 and FY 2012 and almost $9 billion in FY 2013."

Average size of WCMSAs (including professionally and self-administered WCMSAs) - estimates vary up to $100,000.

Professional administration - less than 10 percent of WCMSAs are professionally administered.

Structured settlements - less than 25 percent of WCMSAs are funded with structured settlements.

Seed money - seed money for WCMSAs funded with structured settlements averages approximately 10 percent of the total per case cost.

CMS turn around time - the average CMS turnaround time for WCMSAs is 35 days - and increasing.

Structured Settlements and WCMSAs - Estimates Based Upon Trend Projections

Although final 2013 structured settlement primary market annuity sale totals have not yet been reported, 2013 third quarter results are available for comparison. Note: earlier this week, Berkshire Hathaway reported selling $1.42 billion of structured settlement annuities in 2013 which appears to represent the largest single year company total in the history of the U.S. structured settlement industry.

Based upon a comparison with 2012 structured settlement primary market production results, projected total 2013 sales can be expected to approximate 26,310 annuities and $5.1 billion of premium (approximately $192,000 average premium). Note: S2KM will report actual 2013 structured settlement primary market sales once they have been compiled by Melissa Evola.

Assuming:

26,310 structured settlement annuities were sold during calendar year 2013 producing $5.1 billion of premium; and

25 percent of the CMS calculated $1.8 billion of WCMSAs for fiscal year 2013 were funded with structured settlements; and

The seed money for WCMSAs funded with structured settlements averages 10 percent; and

The average size of WCMSAs funded with structured settlements is $70,000 ($63,000 annuity and $7,000 seed money);

Based upon the CMS inflation/discount methodology for WCMSAs, as promulgated in the October 15, 2004 CMS WCMSA Policy Memorandum, structured settlements have had an inherent cost advantage over lump sum alternatives for funding WCMSAs.

As explained in this prior S2KM blog post, the CMS Workers' Compensation Reference Guide published in 2013 appears to have retained this structured settlement cost advantage.

Strategic Question: Why, therefore, has the structured settlement industry failed to further penetrate the WCMSA market?

The importance of this strategic question will be magnified if, as suggested in Part 1 of S2KM's NAMSAP Regional Conference Report, the CMS WCMSA primary payer model ultimately is applied to:

Liability MSAs as a result of HHS/CMS RIN: 0938-AR43;

Medicaid reimbursements as a result of the Bipartisan Budget Act of 2013; and

Implementation of the Patients' Protection and Affordable Care Act.

Structured settlement professionals identify multiple reasons "why more WCMSAs are not funded with structured settlement annuities". The most significant reasons appear to be:

The relatively smaller size of WCMSA structured settlements; and

The administrative burden created by CMS rules for submitting annuity quotes with rated ages to establish reduced life expectancy.

Conclusion

One strategy for growing the primary structured settlement market: improve administrative rules for determining MSA life expectancies - which should represent a shared priority goal for both structured settlement and MSA stakeholders.

A second and related educational strategy: continue to develop more focused industry study about the respective roles of structured settlements and MSAs within the changing rules of personal injury settlement planning.

April 03, 2013

Thirty-three years following enactment of the Medicare Secondary Payer (MSP) Act and 12 years after the Centers for Medicare and Medicaid Services (CMS) issued its first workers compensation Medicare set-aside (WCMSA) memorandum, CMS has finally published a WCMSA Reference Guide (WCRG).

Enacted in 1980, the MSP Act requires
certain insurers, including liability, automobile, no-fault and workers
compensation insurers, to make payment first for services to Medicare
beneficiaries regarding claimed injuries, with Medicare responsible only
as a “secondary payer.”

CMS,
the agency responsible for administering Medicare policies, failed to
take practical steps to enforce the MSP rules until 2001 when it issued
the first of several policy memorandums addressing WCMSAs. These policy memorandums created a format, checklists and procedures for seeking approval for WCMSAs to "protect Medicare's interests" when workers compensation cases are settled. The WCRG states: "The WCRG follows all CMS policy memorandums currently in effect. The memorandums are published on the CMS website."

Although CMS and its field offices have also issued informal guidance about the use of MSAs in liability cases,
nothing comparable exists to the CMS WCMSA memoranda. As a result,
there is no uniform position or consensus among tort practitioners as to
whether and when MSAs are required in liability cases.

The WCRG continues a series of Medicare legislative and regulatory compliance initiatives which also include the Medicare, Medicaid and SHIP Extension Act (MMSEA) and the Strengthening Medicare and Repaying Taxpayers Act (SMART Act).

Published by CMS on March 29, 2013, the 88-page WCRG(including Appendices) applies only to workers compensation cases. Its intended purpose: to help WCMSA professionals, beneficiaries and other stakeholders "understand
CMS' [WCMSA] amount approval process and to serve as a reference for
those electing to submit such proposals to CMS for approval."

"Any
claimant who receives a WC settlement, judgment,or award that includes
an amount for future medical expenses must take Medicare’s interest with
respect to future medicals into account."

"If
Medicare’s interests are not considered, CMS has a priority right of
recovery against any entity that received a portion of a third party
payment either directly or indirectly."

"Medicare may also refuse to pay for future medical expenses related to the WC injury until the entire settlement is exhausted."

Compromises:"CMS does not compromise or reduce future medical expenses related to a WC injury."

WCMSA statutes and regulations:"There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review."

What are WCMSAs:"A WCMSA allocates a portion of the WC settlement for all future
work-injury-related medical expenses that are covered and otherwise
reimbursable by Medicare. When a proposed WCMSA amount is submitted to
CMSfor review and the individual or beneficiary obtains CMS’approval,
the CMS-approved WCMSA amount must be appropriately exhausted before
Medicare will begin to pay for care related to the beneficiary’s
settlement, judgment, award, or other payment."

Benefit of WCMSA:"The
primary benefit [of submitting a WCMSA] is the certainty associated
with CMS reviewing and approving the proposed amount with respect to the
amount that must be appropriately exhausted."

Goal of WCMSA:"The
goal of establishing a WCMSA is to estimate, as accurately as possible,
the total cost that will be insured for all medical expenses otherwise
reimbursable by Medicare for work-related conditions during the course
of the claimant’s life, and to set aside sufficient funds from the
settlement, judgment,or award to cover that cost."

Creating a WCMSA:"Generally there are four steps involved in creating a CMS-approved WCMSA:

"Analysis of the claim and medical information in order to determine the amount of money required for the fund.

"Negotiation
of a tentative settlement and preparation of draft settlement documents
to settle the WC case incorporating terms for creation and
administration of the WCMSA (CMS is not a party to the settlement).

"Obtaining approval from CMS regarding the settlement and the proposed WCMSA.

"Finalizing the settlement and funding the WCMSA."

WCMSA funding:

"CMS has no process to accept up-front cash payments in lieu of a CMS reviewed WCMSA."

"WCMSAs
may be funded by a lump sum or may be structured, such that a fixed
amount of funds are provided each year for a fixed number of years."

CMS Review of WCMSAs - excluding structured settlement and rated age issues which S2KM will be address in subsequent blog posts.

Introductory note: CMS introduced a WCMSA internet portal in November 2011 for submission of WCMSA proposals.

Review threshold:"CMS will review a proposed WCMSA amount when the following workload review thresholds are met:

"The claimant is a Medicare beneficiary and the total settlement amount is greater than $25,000.00; or

"The
claimant has a reasonable expectation of Medicare enrollment within 30
months of the settlement date and the anticipated total settlement
amount for future medical expenses and disability/lost wages over the
life or duration of the settlement agreement is expected to be greater
than $250,000.00."

"A claimant has a reasonable expectation of Medicare enrollment within 30 months if any of the following apply:

"The claimant has applied for Social Security Disability Benefits.

"The claimant has been denied Social Security Disability Benefits but anticipates appealing that decision.

"The claimant is in the process of appealing and/or re-filing for Social Security Disability benefits.

"The claimant is 62 years and 6 months old.

"The claimant has an End Stage Renal Disease (ESRD) condition but does not yet qualify for Medicare based upon ESRD."

Review not required:"It
is unnecessary for the individual or beneficiary to obtain CMS approval
for a proposed WCMSA amount if all of the following are true:

"The facts of the case demonstrate that the injured individual is only being compensated for past medical expense

"There
is no evidence that the individual is attempting to maximize the other
aspects of thesettlement (e.g., the lost wages and disability portions
of the settlement) to Medicare’s detriment; and

"The
individual's treating physicians conclude (in writing) that to a
reasonable degree of medical certainty the individual will no longer
require any Medicare-covered treatments related to the WC injury.
However, if Medicare made any conditional payments for WC-related
services furnished prior to settlement, then Medicare will recover those
payments. In addition, Medicare will not pay for any WC-related
services furnished prior to the date of the settlement for which it has
not already paid."

Review process:

"If
you choose to use CMS’ WCMSA review process, the Agency requests that
you comply with CMS 'established policies and procedures."

"When
a WCMSA is submitted for approval, CMS must have certain documentation
available to complete a review of the proposal. Table 1 lists the
documents normally submitted with a WCMSA proposal."

"Submit
the gross total settlement amount as a single lifetime number and NOT
the settlement amount minus attorney fees, expenses, etc."

"Once
this information is received, the COBC will apply it to the
beneficiary's Medicare record and assign the case to the Medicare
Secondary Payer Recovery Contractor (MSPRC)."

"The
MSPRC will send the beneficiary a “Rights and Responsibilities” letter
that explains Medicare's recovery rights with respect to conditional
payments and information regarding what steps the beneficiary should
take next."

"Once the Rights and Responsibilities letter is received, all further inquiries must be made through the MSPRC."

"If
the parties to a WC settlement stipulate a WCMSA but do not receive CMS
approval, then CMS is not bound by the set-aside amount stipulated by
the parties, and it may refuse to pay for future medical expenses in the
case, even if they would ordinarily have been covered by Medicare."

"If
CMS approves the WCMSA and the account is later appropriately
exhausted, Medicare will pay related medical bills for services
otherwise covered and reimbursable by Medicare regardless of the amount
of care the beneficiary continues to require."

"You can
see your case’s status on the WCMSAP, if the case was submitted on the
Portal. For cases that were submitted via mail, case status can be
obtained by contacting the WCRC."

"When CMS does not
believe that a proposed set-aside adequately protects Medicare’s
interests,and thus makes a determination of a different amount than
originally proposed, there is no formal appeals process. However, there
are several other options available."

Life Care Plans

"A
Life Care Plan is a dynamic document based on published standards of
practice, comprehensive assessment, data analysis, and research that
provides an organized concise plan for current and future needs with
associated costs for individuals who have experienced catastrophic
injury or have chronic health needs."

"A life care plan
is appropriate when the claimant’s injury or disease is extensive and
serious, e.g., paraplegia, quadriplegia, brain damage."

"Although
submission of a life care plan is optional, you are required to include
drug and dosage lists. Include all pricing charts, cost projections,
pricing information, and explanatory narratives and analyses."

"When
the parties to a WC settlement present CMS with “life care plans” or
similar evaluations prepared by non-treating physicians to support and
justify their proposed WCMSAs, Medicare will consider accepting such
evaluations if the physician does all of the following:

"Examines the claimant;

"Reviews the claimant's medical records;

"Contacts any of the claimant's treating physicians (if applicable);

"Is available to answer CMS’ questions;

"Prepares a report that summarizes the above; and

"Offers
a written medical opinion as to all of the reasonably anticipated
future medical needs of the claimant related to the claimant's work
injury or illness/disease."

Future Treatment

"Determine
the cost of future medical expenses that are directly related to the
injury or illness suffered by the worker. This amount can be determined
by reviewing medical records and past medical expenditures. The WCMSA
must show the amount of money that should be invested to provide the
yearly expenses for the worker’s life expectancy."

"Note:
In order to protect Medicare’s interests, a WCMSA should be funded
based on the life expectancy of the claimant unless state law
specifically limits the length of time that WC covers work-related
conditions. The key is that both the principal amount that is to be set
aside and the anticipated interest that it will earn must be sufficient
to provide for the worker’s future medical treatment and administration
fees for the worker’s lifetime."

"Identify specific
types of medical services or items, the frequency and duration of the
medical services or items, and the projected costs of the medical
services or items related to the work injury or disease that are
expected in the future in light of the claimant's condition."

Time Frame

"When
you submit a WCMSA for review, CMS tries to review and decide on
proposed settlements within 45 to 60 days from the time that all
relevant documents are submitted."

"Parties to the
settlement may settle the indemnity (non-medical-expenses) portion of
the claim separately from the WCMSA portion, in order to avoid having
indemnity payments continue while CMS is still reviewing the proposal.
CMS will still consider the whole claim, including indemnity, in its
threshold calculations."

Administration

"Once a WCMSA is established and funded, it must be administered."

"This can be done by the claimant, by the claimant’s representative
payee, appointed guardian, or conservator, or by a professional
administrator."

"The administrator of the account will be responsible for keeping accurate records of payments made from the account."

"The administrator must establish the WCMSA account, pay Medicare-covered
services from the WCMSA account, and provide CMS with a reporting of
the expenditures from the WCMSA."

"Every
year, beginning no later than 30 days after the 1-year anniversary of
settlement the administrator must sign and send a statement that
payments from the WCMSA account were made for Medicare-covered medical
expenses and Medicare-covered prescription drug expenses related to the
work-related injury, illness, or disease."

Death of the Claimant

"If
a claimant dies before the WCMSA is completely exhausted, the [Regional
Office] and [Medicare Secondary Payer Recovery Contractor] will ensure
that all claims have been paid."

"Then any amount left over in the WCMSA may be disbursed pursuant to state law, once Medicare’s interests have been protected."

"This
may involve holding the WCMSA open for some period after the date of
death, as providers, physicians, and other suppliers are permitted to
submit their initial bill to Medicare for a period of 12 months after
the date of service."

"Often, the settlement itself will dictate the appropriate dispersal of funds up on the death of the claimant."

For additional S2KM reporting about government benefit issues, see the structured settlement wiki. For analysis of the interaction of structured settlements and government benefits, see Chapter 15 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).